FOODSERVICE

Review of the Russian Market of Meat Products

Research by the Company “Laboratoriya Trendov”

Meat and meat products are goods traditional to Russian consumers: according to the Russian Federal State Statistics Service (Rosstat), these product types account for more than 9% in consumer expenditures of the Russian population and almost a third of expenditures on food and drinks.

In 2017, dynamics of Russian meat production volumes varied depending on the product type. Meat and offal, for instance, demonstrated growth in both meat categories: indicators for slaughter animals and poultry increased by around 6% and more than 7% respectively in 2017. Due to changes taking place in the country’s agriculture in the context of import substitution, price fluctuations in the market, and consumer demand shifting towards more natural goods, output volumes of both meat varieties and meat products have been demonstrating stable growth.

At the same time, within the time period analyzed, a decline in output of sausage products and canned meat products can be observed, as meat appears to be perceived as a more natural, quality and healthy product compared with the above. Production of convenience meat and meat-containing convenience goods showed steady growth as well, which is also connected to changing consumer behavior models. The evolution of lifestyle and the growing pace of life among the population leads to people having less time for cooking. In these conditions, consumers shift their demand from ‘raw’ meat to convenience meat or straight to the market of food delivery, which has been rapidly expanding, especially in large cities.

A reduction in canned meat output has been occurring for the same reason as that of sausages. It should also be noted that quality canned meat tends to be rather expensive, and in this context the consumer faces a choice (meat, sausage products, convenience meat or canned meat), which they end up making based on the respective consumption scenario (cooking the first or second course; home or dacha consumption; consumption during a trip etc.) in addition to just the price-quality ratio.

In 2015–2017, there was an increase in exports of all meat and meat product varieties in both physical and monetary terms (+136.8% and +158% respectively against 2015), as well as of ready and canned meat products (+53.3% and +81.8%). This situation is connected with the gradual shift of Russian agriculture and food industry towards exports. Sausages and similar meat products were practically stable in volumes throughout the time period analyzed (-1.8% and 2%).

Poultry occupied more than 50% of Russian meat exports in monetary terms. This is largely due to the fact that at the moment poultry farming is the most developed branch of animal husbandry in the country. In addition, consumer prices for poultry are significantly lower than prices for pork and beef, which naturally stimulates growth in its consumption. Last but not least, considering the healthy eating trend, consumption of poultry is becoming increasingly relevant.

In 2017, 31.1% of exports of poultry meat and processed poultry goods in monetary terms fell on Ukraine, 18.5% were supplied to Hong Kong, and 14.4% fell on Kazakhstan. These three countries are the leaders in exports in the period analyzed, although their total share has been decreasing (from 75.1% in 2015 to 64% in 2017), which indicates that Russia is expanding its borders of exports.

The bulk of exports of meat and meat products in monetary terms is accounted for 2 countries, namely Brazil (49.1% in 2015 and 52.8% in 2017) and Belarus (18.9 and 22.1% respectively), covering almost two thirds of the total supply volume.

Almost three fourths of exports of sausages and similar meat products in value terms belong to Kazakhstan (85% in 2015 and 73.3% in 2017).

One third of exports of ready and canned meat goods in monetary terms falls on goods produced from cattle meat (41.7$ in 2015 and 35.8% in 2017) and poultry (30.1 and 45.9% respectively). Products exported are mainly supplied to Kazakhstan (more than 40% during the time period in question) and Belarus (more than 16%).

Imports of meat and meat products in 2015–2017 declined due to the reasons listed above (the country’s self-sufficiency in this regard has been growing), which ended up reflecting the volume of supplies in physical and monetary terms (-3.8% and -13.1% respectively to 2015). Growth in imports was recorded in sausages and similar meat products and equaled 32.5 and 63% respectively in volume and value terms. Slight growth (+10.5% and +2.4%) was demonstrated by ready and canned meat goods, which is primarily due to a decline in demand for these product varieties.

The bulk of imports of meat and meat products in monetary terms falls on frozen cattle meat and pork – 34 and 30% respectively during the time period analyzed. These branches of meat production in Russia are developing at the moment. Emphasis is being made on domestic production, although exports are starting to develop as well.

More than 90% of sausage imports (94.6% in 2015 and 96.4% in 2017) fell on Belarus. For this reason, imports of sausages into Russia are growing against the dropping consumption – Belarussian manufacturers have been increasing their activity in the Russian market.

Along with the case of sausage products, Belarus is the leader in imports of ready and canned meat products, accounting for a growing share in value terms (41.9% in 2015 and 54.8% in 2017). Italy is occupying the stable second position with the share of around 18% in the time period in question. The products mainly imported are goods made from pork (more than 40% during the time period analyzed) and cattle meat (more than 30%).

By comparing data on domestic output, exports and imports, one can make the conclusion that in 2017, only 15% of domestic production fell on the share of meat imports. Said indicators for sausage and similar goods were 1.4% of imports and 1.7% of exports in domestic production, whereas canned meat occupied 10.6 and 10% respectively in domestic production.

The analysis of the current price conditions indicates that the meat market has clearly reflected the situation that formed in a number of consumer markets – the price increase of 2015 as a result of the crisis and sanctions imposed. In 2016, following a sharp increase in prices by more than 20%, the market was practically stabilized, and prices are growing at 3–4% per year. This is confirmed by prices of agricultural manufacturers, which are stable and have been on a decline.

To summarize the results of the study, we can conclude that the Russian market of meat and meat products is now past the crisis and the imposition of the sanctions, which has had a positive impact on growth in domestic output. At the same time, the market is currently being affected by changes in consumer behavior models. These trends cannot be disregarded in developing new products and introducing them to the market.

Elena Ponomareva,Candidate of Economic Sciences,member of the Russian Marketers’ Guild,Research Company “Laboratoriy